What is a Post-Dated Cheque? Meaning, Validity & Loan Uses

Did you know you can now schedule automatic payments for later dates? Technology may have made this feature accessible to people nationwide now, but deferring payments is not a new concept. The feature has been around for decades in the form of a post-dated cheque (PDC), a financial tool that originally made deferred payments possible.

Table of Content

• What is a Post-Dated Cheque (PDC)?
• Why Are Post-Dated Cheques Issued?
• How to Write a Post-Dated Cheque?
• Validity of a Post-Dated Cheque
• Legal Consequences of Dishonouring a Post-Dated Cheque
• Alternatives to a Post-dated Cheque

In India, post-dated cheques are widely used for purposes such as rent payments, EMIs, and business transactions. So, if you are someone new to this or just want to understand it better, here is a short guide that will walk you through the meaning of PDC, how it works, its validity, and much more

What is a Post-Dated Cheque (PDC)?

PDC’s full form is post-dated cheques; it’s a regular cheque with a future date written on it. This means the person receiving this cheque cannot cash or deposit it until the date mentioned on the cheque.

To help you better understand how this works, here is an example of a post-dated cheque:

Suppose today is 3rd June, but you write a cheque dated 15th June. That cheque becomes a post-dated cheque, and the bank won’t process it until the 15th.

Why Are Post-Dated Cheques Issued?

Now that you know how a PDC works, here are some reasons why they are issued:

• Rent Payment: Many landlords often ask tenants to submit post-dated cheques for future payments.
• Loan Repayment: When you take a loan, such as a personal loan, the lender asks for a series of post-dated cheques as a form of repayment security. Unlike loans that require collateral, a loan against PDC cheques is typically unsecured, and the cheques serve as a commitment to repay the loan.
• Avoid Late Fee: By issuing a PDC in situations where you don’t have enough funds, you can avoid late fees and ensure your commitment to pay is intact.
• Business Transactions: Business owners often use post-dated cheques for transactions to maintain good relationships with suppliers and customers and ensure continuity in operations.

Suggested Read: Step-by-Step Procedure for Applying for a Small Personal Loan Online

How to Write a Post-Dated Cheque?

Writing a post-dated cheque is exactly the same as how you write a regular cheque. The only difference is that you fill in a future date and not the current date. Here are some key steps to ensure you write the cheque correctly:

• Write a Date: Ensure that the date on the cheque is in future.
• Write the Amount: Just as you would in a regular cheque, write the amount, both in figures and words.
• Payee’s name: Write the name of the person or entity you are paying.
• Signature: Sign that cheque like you would in a regular cheque.

Validity of a Post-Dated Cheque

The validity of a post-dated cheque is three months from the date written on it. For instance, if a post-dated cheque is issued or payable on 20 May, it will be valid till 19 August. After that, it will become invalid, and the bank will not process it.

Legal Consequences of Dishonouring a Post-Dated Cheque

If you issue a Post-Dated Cheque and it bounces due to insufficient balance, then you could get into serious trouble. As per the Negotiable Instruments Act, 1881, in India, dishonouring a post-dated cheque is a serious offence.

The payee (person who received the cheque) can: -

• Issue a legal notice to you within 30 days of the cheque bounce.
• Initiate a legal case if you fail to make the payment within 15 days of receiving the notice.

Upon conviction, the defaulter may have to attend court visits, pay fines, or even serve jail time in extreme cases. So, while issuing a Post-Dated Cheque, always ensure you have the funds in your account by the due date.

Alternatives to a Post-dated Cheque

While post-dated cheques are widely used and offer many benefits, they also have some drawbacks. They are prone to wear and tear and can get misplaced. Also, writing mutilated cheques for multiple payments can be a little time-consuming.

Here are some alternatives to post-dated cheques:

• Standing Instructions (SI): Standing Instructions allow you to automate regular payments directly from your bank account. This method is ideal for fixed, recurring payments such as EMIs, utility bills, or insurance premiums.
• Electronic Fund Transfer (EFT): Electronic fund transfers via netbanking, like NEFT, IMPS or RTGS, are becoming a more popular method for transferring funds.

As we conclude, it is clear that post-dated cheques are a reliable tool for deferred payments, especially in loans, rentals, and business transactions. However, it’s essential to understand their legal implications, especially in the case of dishonour, and consider safer, more efficient alternatives where possible.

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